Building Trust in Crypto Exchanges: Why Figure Markets Took a Different Route

The Cracks in Crypto Trust

If there’s one thing 2024 and 2025 have made painfully clear, it’s that trust in crypto exchanges remains fragile. For all the progress in market maturity, the same risks keep resurfacing. The Bybit breach earlier this year was a fresh blow, exposing once again how even the biggest players can fall short on security. Billions in user funds were left exposed, shaking confidence not just in Bybit, but in centralized exchanges across the board.

Platform hacks, rug pulls, and legal enforcements are accelerating. Even regulated platforms are finding themselves entangled in enforcement actions, while under-secured ones continue to suffer breaches at alarming rates. Users who thought they could trust the size or reputation of an exchange are learning the hard way that it’s not enough.

The hard truth is this: crypto exchanges remain a prime target. Attackers follow the money, and centralized platforms concentrate vast amounts of customer funds in single points of failure. Layer that with opaque business practices and inconsistent regulation, and the result is predictable.

So the question becomes unavoidable: what does it take for a crypto exchange to truly build trust today? Not just the illusion of it, but genuine structural trust, where security isn’t promised, it’s guaranteed by design.

The Problem

At the heart of most exchange failures is one common flaw: centralized custody. No matter how advanced the cybersecurity or how strict the compliance, when billions in customer assets sit under the control of a single entity, it creates an irresistible target: hackers and internal abuse.

History keeps proving the point. The collapse of FTX wasn’t a result of poor external defenses. It was the misuse of customer funds behind closed doors. Celsius followed a similar path, funneling user assets into reckless strategies until the whole thing collapsed under its weight. These weren’t failures of compliance checklists. They were failures of structure.

Even when exchanges boast about passing KYC and AML requirements, they miss the core issue: identity verification doesn’t prevent misuse of funds if custody is concentrated. Regulators can only do so much once the damage is done. Users are left chasing after restitution, typically at the mercy of drawn-out bankruptcy courts.

This is where self-custody shifts from an ideological statement to a practical safeguard. Keeping control of your assets removes the need to trust an exchange with your funds in the first place. It eliminates the single point of failure that has cost users billions in past cycles. For traders and investors, it’s no longer just a philosophical debate. It’s about survival in a market where custody risk has become the most significant liability.

Figure Markets: Self-Custody by Design

Figure Markets didn’t retrofit self-custody as a marketing tool. They built it into the foundation from day one. Where most exchanges began by holding customer funds in centralized wallets, Figure Markets flipped the model. Users control their assets on this platform through a multi-party computation (MPC) setup.

MPC sounds technical, but the concept is simple at its core. Instead of storing a single private key on a server, Figure splits each key into several fragments or “shards” and distributes them across multiple independent hosts. No individual party holds the whole key, not even Figure Markets itself. When a user initiates a transaction, various parties must collaborate to approve it, but only the user can trigger this process.

This structure effectively removes the most significant risk from the system. Even in a worst-case scenario, where Figure Markets were to shut down entirely, users would not lose access to their funds. There’s no lockup, no bankruptcy queue, and no exposure to internal mismanagement. Control remains with the user, as it should.

What Figure Markets is doing here isn’t a matter of promises or platform reputation. It’s a structural approach to trust, one that doesn’t ask users to believe, it lets them verify. In an environment where exchanges fall as fast as they rise, this architecture offers something the market desperately needs: confidence by design, not by marketing.

Not Just Safe, But Also Regulated? 

In today’s market, where regulators are closing in fast, compliance is just as critical. This is where Figure Markets takes another rare step forward. Their launch of YLDS, an SEC-registered yield-bearing stablecoin, is a regulatory milestone that few others have reached.

The crypto industry is full of exchanges offering high-yield products, but most operate in legal grey zones. Platforms stretch definitions, dodge scrutiny, or rely on offshore loopholes to keep their yield programs alive. Figure Markets, on the other hand, went straight through the front door. By securing SEC approval for YLDS, they’ve given users something extremely rare: a yield product that doesn’t live under the constant threat of shutdown or enforcement action.

This is where Figure Markets also pulls ahead of typical DEXs. While decentralized exchanges boast self-custody, they rarely prioritize regulatory clarity. Many operate anonymously, outside formal jurisdictions, and leave users exposed to risks that extend beyond smart contract bugs. Figure Markets combines the benefits of decentralization, like user control and reduced custodial risk, with legal protections that decentralized platforms often lack. In short, you get the freedom of a DEX, but with the reassurance of compliance.

YLDS pays daily interest, is backed by the same assets that support prime money market funds, and offers full peer-to-peer transferability. But the real win is the regulatory clarity. Institutions and cautious retail investors alike can engage with this product knowing it stands on solid legal ground.

In an industry still shadowed by crackdowns and compliance uncertainty, Figure Markets has found a way to separate itself.

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Building a Safer Ecosystem

What Figure Markets is building is closer to a complete ecosystem, but with a crucial distinction: risk control is baked into the design of every product.

Take their crypto-backed loans. Collateral stays in secure custody, with no hidden lending out the back door. Users borrow against their Bitcoin or Ethereum, with flexible repayment options and transparent loan-to-value ratios. There are no credit checks, and no prepayment penalties, but critically, there’s also no risk of your assets being deployed elsewhere without your consent.

Then there’s P2Prime, their lending auction platform. Here, users lend their funds directly into a Dutch auction system where borrowers compete for the best rates. Even in this setup, Figure Markets maintains strict collateral requirements and automatic liquidations when borrowers approach risky LTV levels. It’s a system that keeps lenders in control while ensuring that borrowers can’t overextend, which is a sharp contrast to the under-collateralized practices that have led to blowups across the industry.

Forward Vault follows the same principle. Idle stablecoins are swept into a portfolio of U.S. home equity loans, providing yields of up to 8% without compromising liquidity. Users maintain daily access to their funds, and because the yields come from real-world assets, returns are grounded in reality rather than inflated by risky leverage.

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Can This Approach Win Market Share?

Figure Markets isn’t yet a household name in crypto, and they know it. The platform is still early in its lifecycle, with limited liquidity and a narrow list of tradable assets. Global fiat funding options are rolling out gradually, and like any new exchange, they face the uphill task of attracting active traders in a crowded market.

But what they do have is conviction and capital to back it. The $60 million Series A funding round was a signal of ambition AND a commitment to infrastructure first. The likes of Pantera Capital see the structural gap in the market: exchanges that users can actually trust at both the technical and regulatory level.

This matters more than ever. User fatigue with high-risk platforms is growing. The pattern we see from our data shows that platforms that took shortcuts, from poor custody setups to excessive leverage, have paid the price in both reputation and assets lost. Figure Markets is playing the long game by building differently.

It’s still early days, but as users and institutions look for safer alternatives, Figure Markets stands out as a serious contender. In an environment where trust has become a premium currency, they’re playing it exactly how they need to.

What This Means

If there’s one thing the last few years have taught us, it’s this: rust isn’t given, it’s built, and it’s built through architecture, not marketing. After the Bybit breach, users don’t care for slick interfaces or “aggressive” incentives. They’re asking tougher questions: Who holds the keys? Is my collateral safe? Will this platform survive a regulatory crackdown?

Custody is step one. Platforms that still rely on centralized wallets create unnecessary risk, no matter how good their KYC or compliance claims might be. True safety comes from user-controlled custody models where even platform failure doesn’t jeopardize customer assets.

Transparency is next. Hidden spreads, obscure lending practices, and risky rehypothecation have all been common threads in major crypto failures. Exchanges that openly show how funds flow and how risks are managed will win user confidence.

Finally, regulation is no longer optional. Figure Markets has shown that it’s possible to operate within regulatory frameworks while still delivering yield products and advanced trading tools. Instead of treating compliance as a constraint, they’ve made it a feature, and that’s the path others will need to follow if they want to attract serious capital.

Figure Markets isn’t just another startup chasing trading volume. They’re laying out a new blueprint for how exchanges can function in a post-crisis crypto economy. At the end of the day exchanges that earn trust now won’t need to buy it later. 

Frequently Asked Questions (FAQ)

What makes an exchange safer against hacks and breaches?

The biggest factor is custody. Exchanges that hold user funds centrally are more vulnerable to hacks or internal misuse. Safer platforms use self-custody models or decentralized custody like MPC (multi-party computation), which splits control across multiple parties, reducing risk of single points of failure.

How does self-custody protect my crypto compared to traditional exchanges?

With self-custody, you control your private keys, not the exchange. This means even if the platform is compromised, your assets remain secure. In Figure Markets’ case, private keys are split across multiple hosts, making unauthorized access virtually impossible.

Can an exchange disappear with my funds?

Unfortunately, yes. This has happened in the past with centralized exchanges (FTX, Celsius). Platforms holding your keys can misuse or lose your funds. Exchanges like Figure Markets remove this risk by giving users full custody from the start.

What does SEC approval mean for crypto exchanges?

SEC approval, especially for products like Figure Markets’ yield-bearing stablecoin, signals regulatory compliance and scrutiny. It provides additional layers of legal protection for users and helps prevent the risks seen in unregulated platforms offering unsustainable yields.

Are yield products on exchanges safe?

Many high-yield offerings in crypto have collapsed due to poor risk management or rehypothecation of funds. Safer platforms, like Figure Markets, use real-world asset backing (such as home equity loans) and clear regulatory frameworks to support their yield products, reducing exposure to hidden risks.

What should I check before trusting an exchange?

Look for transparent custody solutions, clear regulation, and responsible yield products. Also, verify whether they have disclosed security practices, use multi-party custody, and avoid over-leveraging customer assets.

Can I reduce risk by using self-custody exchanges?

Yes. Self-custody exchanges significantly lower custodial risks because you maintain control of your funds. Even in worst-case scenarios, your assets aren’t trapped or lost due to platform failure.

How does multi-party computation (MPC) custody work?

MPC splits your private keys into pieces, storing them across multiple parties. Transactions require multiple approvals, preventing any single party from moving your assets without consent.

Has Figure Markets ever been hacked?

No. As of today, there are no reported breaches involving Figure Markets. The platform’s self-custody-first approach helps mitigate risks associated with centralized asset storage.

What is the biggest risk when using crypto exchanges today?

The main risk remains custody of assets. Platforms that hold user funds centrally can face external hacks or internal misuse. Regulatory uncertainty also adds risk, especially with yield products. Choosing self-custody exchanges and checking regulatory standing helps reduce exposure.

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